QLACs Explained: Using Part of Your IRA to Guarantee Income Later in Retirement

The IRA Problem Nobody Warns You About

If you've been diligent about saving in a traditional IRA or 401(k), you eventually run into a strange problem: the government starts requiring you to take money out, whether you need it or not. Required Minimum Distributions (RMDs) kick in and force withdrawals — and those withdrawals are taxable income, year after year, for the rest of your life. For retirees who don't need all of that money right away, RMDs can push them into a higher tax bracket, raise their Medicare premiums through IRMAA, or simply force them to take income they'd rather have delayed.

There's a lesser-known tool built specifically to address this: the Qualified Longevity Annuity Contract, or QLAC.

What a QLAC Actually Is

A QLAC is a type of deferred income annuity you purchase using money from inside a qualified retirement account — a traditional IRA or an employer plan like a 401(k). Instead of taking that money as regular withdrawals, you use it to buy a contract that promises to start paying you guaranteed income later, often at an age you choose yourself, up to age 85.

Because it lives inside your IRA, a QLAC isn't a separate savings bucket with its own tax rules — it's a different use of dollars you already have. The money you put into it simply isn't available to spend (or required to be withdrawn) until the income starts.

How It Actually Reduces Your RMDs

This is the part that makes a QLAC genuinely useful for the right person: the dollars used to purchase it are excluded from the account balance the IRS uses to calculate your RMDs. If you move money into a QLAC, your RMD calculation each year is based on a smaller remaining balance — which means a smaller required withdrawal, and less taxable income, for as long as the QLAC payments are deferred.

As of 2026, the amount you're allowed to put into QLACs is capped at $210,000 per person, across all of your eligible retirement accounts combined — and that limit is adjusted for inflation over time, so it's worth confirming the current figure whenever you're considering one. The cap applies per person, so a married couple can potentially use two QLACs, one funded from each spouse's own retirement accounts.

Who a QLAC Tends to Make Sense For

• You don't need all of your RMDs for living expenses. If part of your required withdrawal is simply adding to a taxable brokerage account you don't touch, a QLAC lets you defer that portion instead.
• You're concerned about outliving your other assets. Because QLAC income typically starts later in life (commonly in your 80s) and continues for as long as you live, it works as longevity insurance — a backstop that activates right when other savings are most likely to be running thin.
• You want to manage IRMAA and tax bracket exposure. Lowering your RMD-driven taxable income in your 70s can help keep Medicare premium surcharges and marginal tax rates in check during those years.

A QLAC isn't the right fit for everyone. If you expect to need steady access to all of your retirement savings earlier in retirement, tying up a portion of it in a deferred contract may not serve you well. It's a tool for a specific problem — not a universal strategy.

Where a QLAC Fits Into a Bigger Plan

We tend to think about retirement income in three buckets: money you're storing safely, money that's still growing, and money that's paying you a reliable paycheck. A QLAC is squarely in that third category, but with a twist — it's designed to activate later, filling in exactly where longevity risk tends to bite hardest: the years after other savings have been drawn down for a decade or two.

Takeaway

A QLAC won't solve every retirement income question, and it isn't the only way to manage RMDs or longevity risk. But for the right retiree — someone with more in a traditional IRA than they need for current spending, who's worried about taxes, IRMAA, or simply running out of money late in life — it's a tool worth understanding fully before ruling in or out. If you're not sure whether your own IRA balance and RMD schedule make you a candidate, that's exactly the kind of question a complete income plan should answer.

This article is educational only and not personalized financial, tax, or legal advice. QLAC contribution limits are set by the IRS and adjust periodically — confirm the current limit before acting. Guarantees are subject to the terms of the specific contract and the issuing insurance company's claims-paying ability.